“In my darkest moments, in fact, I wonder if the monetary accommodation we have engineered might not be working in the wrong places. Far too many of the large corporations I survey report that the most effective way to deploy cheap money raised in the current bond markets or in the form of loans from banks, beyond buying in stock or expanding dividends, is to invest it abroad where taxes are lower and governments are more eager to please. ”

“And if — and here I especially stress the word if because the evidence is thus far only anecdotal and has yet to be confirmed by longer-term data — if it were to prove out that the reduction of long-term rates engendered by Fed policy had been used to unwittingly underwrite investment and job creation abroad, particularly in countries where exchange-rate adjustment is inhibited, then the potential political costs relative to the benefit of further accommodation will have increased.”

“Most all the businesses I talk to are expanding investment in productivity enhancement. Far too few of the large companies I talk to report interest in hiring American workers or committing to large-scale CAPEX (capital expenditures) in the United States; they believe their potential for return on investment (ROI) is greater elsewhere. The smaller companies that do not have global options are putting off hiring until the coast is clear on the tax and regulatory fronts. This reticence intensified during the final innings of the election season, which begs the question of whether this will now change with the new Congress.”

“Despite their theoretical promise, reductions in interest rates to Lilliputian levels have not done much thus far to spark loan demand. Loans are desirable when business see an opportunity for tapping credit markets to earn a return on investment that significantly outpaces the cost of credit and other risk factors. Even with the low rates that already prevail, businesses lack confidence that they will earn a superior ROI by investing so as to expand their domestic workforce, in comparison to what they might earn from alternative investments abroad or by buying in their stock or cleaning up their balance sheets.”

“Recent data make clear that the risks of a double-dip recession and deflation have ebbed and that economic growth and job creation are beginning to flow. Yet the ships of job-creating investment remain, for the most part, tied to the docks—or worse, choose to sail for foreign ports where tax and regulatory conditions are more favorable, very much in the same way that Ohio, Michigan, New York and California businesses and workers have navigated to Texas.”

“I don’t believe this has much to do with the Fed. None of my business contacts, large or small, publicly held or private, are complaining about the cost of borrowing, the lack of liquidity or the availability of capital. All express concern about taxes, regulatory burdens and the lack of understanding in Washington of what incentivizes private-sector job creation. All are stymied by a Congress and an executive branch that have appeared to them to be unaware of, if not outright opposed to, what fires the entrepreneurial spirit. Many have begun to feel that opportunities for earning a better and more secure return on investment are larger elsewhere than here at home.”

“All business operators, public or private, large or small, have a duty to their shareholders or their creditors to earn the highest return on investment possible. In a globalized economy, they can go anywhere on earth to do so. They can invest in China. Or India. Or Vietnam or Singapore or Brazil or Mexico or Africa. Or anywhere in an expanded, post-Cold War Europe. Nothing short of the poison of capital controls or protectionism can prevent them from doing so. Which raises the question: What must now be done to get businesses to invest in job creation here at home with the cheap and abundant money the Fed has made possible?”

“Our Congress must find a way to align spending with income through taxation that (a) does not cut off the incipient economic recovery, (b) provides a credible path toward bringing their accounts―including the unfunded liabilities of Medicare and Social Security―to solvency and (c) respects the fact that in a globalized, cyber-ized world, those with the ability to create jobs may create them in places that offer more compelling fiscal and regulatory environments.”

“This last point is not unimportant. Permanent jobs are created by the private sector. Businesses, large and small, publicly or privately held, have a duty to earn a return on investment for their shareholders. In a globalized, cyber-ized world, they need not invest or expand their payrolls in the United States; they are free to go practically anywhere on the planet…There cannot be robust direct investment in the United States without confidence in the nation’s ability to reverse its budgetary death spiral, especially the inexorable accumulation of national debt and unfunded liabilities of Medicare and Social Security.”

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